Convertible car seats can face the rear or the front, Combination car seats are forward facing only and convert into a booster later.
I don't know that there is much more you can do, other then buy her a convertible seat, show her how to use it for her 7mo rearfacing, put her 2 yo in the combination seat the other one was in, and make sure she has an infant seat for the new one on the way.
It is very dangerous to have a child forward facing before a year and 20lbs. She is definately putting both of her children at risk for injury in a crash. It is too bad she is unwilling to research and make appropriate choices for her children. You could also look up a car seat check and offer for you both to go to one. I don't know about where you live but when We do checks, no child leaves the check in a seat that is that misused. If the parents refuse to listen to us telling them a 7 mo has to be rearfacing and won't allow us to install the seat that way, the cops are called as they leave. We give seats to anyone who doesn't have the right ones, or can't afford to get the right ones.www.seatcheck.org
This is a site for car seat tech's in the U.S.